IT was at the height of the Cold War that Europe successfully struck a gas supply deal with former Soviet Union through a giant pipeline to be laid by the technologically advanced Europeans themselves. Nothing stood in the way -neither ideological difference nor any security consideration. The simple economic formula -- that energy-starved Europe needed gas and a cash-strapped Soviet Union was in dire need of money -- was enough.

Years later when the idea of IPI (lran-Pakistan-India) trilateral gas pipeline was broached, it was immediately caught up in the vortex of the US anti-terror politics. The US with its sour relationship with Iran since the 1979 Islamic revolution and recently over its quest for a nuclear status wants, in its bid to clip the wings of Iran, to set back the implementation of IPI project. The idea is to stall Iran's nuclear ambitions by depriving its from securing additional revenues through the sale of surplus energy to its lucrative market in South Asia.

Iran has since been targeted for various options available to the US administration: a regime change, pre-

emptive strike, or economic sanction, and received the latter's first salvo when President Bush called it one of the "Axis of Evil." Obviously, it is a misplaced hope that an enraged US would allow smooth implementation of the IPI pipeline of which Iran is a major beneficiary. It is now obvious that the main purpose of Condoleezza Rice's recent visit to Islamabad was to dissuade President Musharraf from going ahead with the Iranian gas pipeline project and that Mahmud Ali

Kasuri's trip to Washington was in continuation of the unfinished talks regarding the controversial project.

As major disincentives the US has a number of legal instruments handy to dissuade the potential investors from taking part in the project. For example the Iran-Libya Sanction Act (ILSA) of 1996 imposes sanctions on all non-US companies investing more than $20 million in Iran's energy sector. Secondly, the president's executive order of 1995 prohibits the US companies and their foreign subsidiaries conducting business with Iran while banning any "contract for the financing of the petroleum resources in Iran."

However, the dynamics of international business prevailed as a whole host of Europeans and far easterners

made substantial investment in Iran's energy sector, with ostensible impunity and without having suffered any setback in their American operation. They include energy giants like Malayasia's Petronas, France's Elf Aquitaine, and Italy's Emi/Agip, who all secured important contract to develop Iran's offshore oil and gas. Canada's Bow Valley Energy received a buyback contract to develop the famous Balal field. To top it all, a foreign subsidiary (Cayman Islands)

of the famous Halliburton reached an agreement along with a local Iranian partner to help develop phases 9 and 10 of South Pars gas field. There is hardly a chance of the US invoking the restrictive terms of its legal instrument at this stage.

Now the hurdle that appears on the way is the Iranian constitution's specific prohibition on allowing any foreign entity to own any asset in Iran's energy sector. However the professionals in the country's energy sector may persuade their political masters to treat the pipeline issue differently or construct it as Iranian property while it passes through Iranian territory. Given the recent rise in oil prices, Iran is flush with enough foreign exchange to meet the expense for laying the 1100 km of pipeline that

would run through Iranian territory if, of course, the source is the South Pars gas field, as reported in an energy magazine.

What about the pipelines that would run through Pakistan and Indian territory? Just as the pipeline in Iranian territory will likely be built and owned by Iran, it would also seem logical that the 700 km stretch from the Iranian border to Pakistan's consumption centres and the 600 km stretch from the Indo-Pakistan bor-

der to India's consumption centres will be the responsibility of Pakistan and India respectively.

But that's not all. What should be the cost of the pipeline? What about the fundability of the project? It is probable that there will have to be provision for storage sites in Pakistan to cope with any unforeseen disruption in gas supply to India. What will be the diameter of the pipe and will there will be need for compressor stations along the way to ensure a constant flow of up to 3.2 billion cubic feet of gas a day. As regards the cost of the pipeline, there is no standard guide, and the only way to determine it is to compare and base one's experience on similar costs incurred elsewhere in the construction of pipelines. For example, Iran is building a

56 inch IGAT 3 pipeline northward from South Pars. This 500 km pipeline is known to have cost between $500,000 and $1 million per km. But it is only the part of the total cost.

The quality and the type of the steel to be used for a particular pipeline are predetermined depending on the terrain conditions it has to traverse. For example, the Baku-Tbilisi Ceyhan oil pipeline of 48 inches diameter required pipe weighing 350 tons per km. Assuming the cost of the steel to

be $1000 per ton, the cost of the pipe comes to a formidable $350,000 per km. The only area of relief is that of labour which is one-fifth the cost of labour employed in the western world.

Although Pakistan and India have recently made progress in talks on financial, technical, security and legal issues with respect to the estimated $7.4 billion Iran-Pakistan-India (IPI) gas pipeline project and agreed to finalise a framework accord in two months, the project may not be able to take off before so many of its intricate details are sorted out and the differences, if any, among the partners are ironed out. So the way forward is still strewn with a lot of road blocks.

Also no less problematic is its

political dimension. The BJP government was averse to the very idea of the pipeline running through Pakistani territory lest Pakistan cut off the flow of the gas in certain situations to put pressure on New Delhi. The opponents of the project sought to bypass Pakistan's land surface and lay the pipeline across the Arabian Sea. But this would only raise the cost many times and there is no reason why Pakistan would allow the under-sea pipeline to transit through its territorial water. India also haggled over the price of gas and at times it seemed that the project might fall through.

India made yet another awkward demand that China be involved in the project in some way that would guarantee an uninterrupted flow of gas despite ups and downs in IndoPakistan relations. The proposal being unrealistic, India had to finally rely on assurance of Tehran with whom India has cordial relations. Tehran rightly assured India that Islamabad wouldn't disrupt the pipeline in its own interests, since it stood to gain an annual revenue of $600 million as transit fee.

The Iran-Pakistan-India pipeline is of seminal importance, not only for the role it will play in meeting South Asia's energy needs and precedent it would set for other such projects, but also because of the impact it will have on Indo-Pakistan relations. Even if Pakistan agrees under US pressure to abandon the IPI project, India will not for purely economic reasons. The Iranian gas pipeline is equally costeffective for all three partners.

Brig ( retd) Hafiz is former DG of BIISS.